Weather drives corn higher, while soybeans and wheat follow

Grain & OIlseeds Report

Corn: To start the new week, corn saw a one- to five-day forecast outlook that centered four-inch rains over the eastern half of Iowa. That same forecast also had significant rains for most of the western Corn Belt as a slow-moving weather system is expected to produce heavy rains in the western Midwest with moderate rains elsewhere.

This forecast was the news that started the rally Sunday night. Large short covering was seen at the 8:30 a.m. opening, adding another push past overnight highs. Shortly after 9:30 a.m., the short covering bounce caught the attention of fund buying and from that point all the grains began to rally. Old-crop traders saw unexpected help as most speculators would be buying December corn on this news, but funds only trade the most liquid contract, which in corn meant they were buying July.

This rain system was the profit-taking point for all short positions and the starting point for new fund investment. For now, it is impossible to know just how much fund buying to expect whether it is one day or ends up being a week or more of buying. It is fair to say that on a limit higher day for corn, traders factored in an entire week of rain in just one day.

What will be the wild card for more potential buying is the 11- to 15-day forecast, which introduced another one-inch rain system after a short break from the rains expected this week. A combination of big rains at what is now a concerning time for corn planting was the cause of Monday’s big move higher. Trade estimated that planting pace would come in at 9%, which traders likely thought was too high of a number by the end of the trading day. The actual planting progress number came in at 5%.

Now that the current rain system is factored in, all eyes should turn to the extended forecast. Corn bulls should not count on the current system for another major move higher as most of it was likely traded Monday. Corn bears exited short positions in a big way and next chart resistance is not found until 573-3/4. Weather is still the main driver with the 11- to 15-day forecast, guiding us going forward but we now need to watch fund activity as well…Ryan Ettner

Soybeans: The soybean market rode a bullish weather forecast as well as a tight cash market to have one of its strongest up days and highest close for the month of April. A cold, wet forecast for the end of this week and into the weekend will keep planters out of the field. In the long run, corn planting delays will shift some corn acres into beans but Monday that did not matter.

As the say, rising tides lift all boats and with corn trading limit up the buying did spill into the beans. The funds were estimated to have bought 7,000 soybean contracts today. Old-crop beans continue to find support due to the tight cash situation. The bean basis is trading a dollar over in most portions for the Midwest. Even with these aggressive cash bids, farmers continue to hold tight to what they have left in the bin. Delivery’s against the May contract start tonight. No deliveries are expected to the lack of cash grain movement.

Export inspections came in today at 8.935 million bushels, which was above the trade anticipated range of 4.0 to 8.0 million bushels. With the cash market continuing to struggle to get beans to move off farm, this should help support old-crop beans. With the trade still talking that the U.S. could pick up bean acres due to planting delays in corn and spring wheat, the new crop beans could struggle to rally…Jim McCormick

Wheat:

Wheat export inspections for the wheat were 30.857M bu, which were well above estimates of 21.0-25.0M bu.

The Wheat Quality Council will start their annual tour of the HRW fields in Kansas today. Analysts estimate Kansas wheat yields at 35.2 bu/acre versus the 10-year avg. of 39.4 bu/acre.

The wheat complex finishes higher on the day amid concerns about crop damage and a strong corn market. The weak US Dollar also supported wheat today.

Analysts estimate total Kansas wheat production of 288.3 Mbu this year versus last year’s crop of 382.2 Mbu. Crop problems in the Ukraine and Russia will also lead to a drop in total world wheat production.

Weather forecasts are calling for another round of freezing temperatures in the HRW area. Kansas and Colorado have the highest potential for crop damage.

Wheat Good-to-Excellent rating was down 2% from last week to 33%. Spring wheat planting is 12% complete versus 5-year average of 37%. Wheat should continue to find support until conditions improve.

July Minneapolis wheat closed above resistance of 817’0, which could lead to a move higher in the 844’0 area…Alex Bassett

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com